Why buy an electric bike on a Cycle to Work Scheme?
Using a Cycle to Work Scheme is becoming a more and more popular way to buy an Electric Bike. Not only does it provide you with a flexible way to pay for the bike but you could also save up to 42% (See details below).
What is the Cycle to Work Scheme?
Cycle to Work scheme is a UK Government tax exemption initiative introduced in the Finance Act 1999 to promote healthier journeys to work and to reduce environmental pollution. It allows employers to loan cycles and cyclists’ safety equipment to employees as a tax-free benefit.
Who is eligible for the scheme?
All company employees qualify for the scheme, providing that they are UK Taxpayers via the PAYE system and over 16 years of age. Earnings must remain above the level of the national minimum wage after the salary sacrifice has been deducted. Employees under the age of 18 would need a guarantor to be able to participate. Self-employed individuals are not permitted to take part in the scheme.
What equipment is included under the tax exemption
Eligible equipment includes cycles, electrically assisted pedal cycle and cyclists’ safety equipment. The tax exemption defines a “cycle” as ‘a bicycle, a tricycle, or a cycle having four or more wheels, not being in any case a motor vehicle’.
How does it save me money?
The scheme allows employees a tax exemption whereby they save on Income Tax and National Insurance contributions by having the cost of the bike deducted from their gross salary via salary sacrifice. Payment is to be made in the form of interest free weekly/monthly instalments.
How do the savings work?
The savings are made via a salary sacrifice scheme. The employer pays the initial cost of the bike/equipment and the employee repays the company that full amount back but through their gross pay saving on tax and national insurance. A basic rate tax payer could save up to 32% (20% tax and 12% National Insurance). A higher rate tax payer could save up to 42% (40% tax and 2% National Insurance). For a full estimate, visit our savings calculator on our home page.
What is a salary sacrifice?
Salary sacrifice is where an employee gives up the right to part of their pay due under his or her contract of employment. Usually, the sacrifice is made in return for the employer’s agreement to provide the employee with some form of non-cash benefit, for example a bicycle.